Chattanooga Times Free Press (Tennessee)
For nearly a decade, Chattanooga resident George Rachels has been without insurance on his property in Lookout Valley.
When storms raked the region last week, flood waters rose in his house and climbed 41 inches high inside the garage where he works. Now he says $75,000 worth of damage.
“I wasn’t figuring on another ’73 flood,” he said. “It’s worse than it’s ever been before.”
In 1984, Mr. Rachels was dropped by his insurance company after he said he filed one too many claims for damage. Consumer experts said Mr. Rachels may not be alone.
As the insurance industry faces a slow economy, policy holders cleaning up from storms that ravaged Tennessee during the first week in May could be facing a grim insurance reality: Use the coverage you pay for and risk being dropped from policies.
“In this moment, consumers must be protected and must be allowed to use their insurance policy without fear of losing it,” said Doug Heller, a senior consumer advocate at the Foundation for Taxpayer and Consumer Rights, based in California. “Instead of tightening their own belts, insurance companies have been tightening the noose around the necks of consumers.”
The problem, experts said, has become particularly acute in the past two years, when companies began to depart from old standards allowing policy holders to file several claims before risking higher fees or losing the insurance completely.
“With most major companies, it used to be two or three strikes and they cancel you,” said Charlotte Lawhorn, president of Lawhorn & Associates Insuranc in Hamilton County. “Now, it’s one and they cancel you.”
At State Farm, Tennessee’s largest homeowners insurance company, officials said they do not comment on their underwriting policies, but they said any change in the industry isn’t related to the economy.
“Policies are always subject to review or cancellation,” said Shawn Johnson, a spokesperson for the company in Murfreesboro, Tenn. “We have a financial obligation to our owners to charge the appropriate rate and have the appropriate business. In that regard we have to continually review policy holders’ claims history to review whether or not we want to insure them.”
Officials said filing claims isn’t the only thing that can put consumers in a dicey situation. Just making inquiries about damage can sometimes have serious ramifications.
A central database on insurance claims codes inquiries as damage claims, Mr. Heller said. When other insurance companies run checks on prospective customers, inquires can be damaging, too.
An exception is separate flood insurance. The risk of being dropped doesn’t apply to flood insurance policies, which all are underwritten by the federal government.
In Chattanooga, about 50 percent of the claims filed to State Farm from the storms in early May are on homeowner’s policies, not flood insurance policies, Mr. Johnson said. Statewide, the company has 367,109 customers with homeowners policies.
Still, both consumer advocates and insurance agents said customers who are cleaning up from the storms should file and document their claims.
“We pay our insurance policies year in and year out, and we know full well that if we miss a payment by a day we’ll be canceled,” Mr. Heller said. “Now they’re threatening if we have the gall to use the product we’re paying for, we’re going to lose it? That’s totally unacceptable.”
E-mail Ashley M. Heher at: [email protected]